Monday, January 30, 2006

The Spirit of a Libertarian Economy in the Absence of a Protestant Ethic

Last week, Ross Douthat of The American Scenesuggested there is a connection between “a more libertarian economy” and the breakdown of “sensible middle class values”. On first pass, I thought this smacked of conservative heresy, but after some reflection (and re-reading), I think Mr. Douthat is giving expression to a concern that has been with capitalism since its inception.

Although the specialized division of labor is crucial to capitalism, Adam Smith, in his monumental work Wealth of Nations (hereafter, WN), warned that:

The man whose whole life is spent in performing a few simple operations, of which the effects are perhaps always the same, or very nearly the same, has nooccasion to exert his understanding or to exercise his invention in finding out expedients for removing difficulties which never occur. He naturally loses,therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to become. The torpor of hismind renders him not only incapable of relishing or bearing a part in any rational conversation, but of conceiving any generous, noble, or tender sentiment, and consequently of forming any just judgment concerning many even of the ordinary duties of private life. (WN 5.1.178)

Smith, of course, could not even imagine how far this danger might go with the level of automation we have achieved in our day, but there is another peril of capitalism that runs even deeper. Smith wrote that

“capitals are increased by parsimony, and diminished by prodigality and misconduct” (WN 3.14).

That is, capitalism depends upon the members of society to forgo immediate gratifications and save (and reinvest) their earnings. Capitalism is greatly superior to the mercantilist systems of Smith’s day for raising the standard of living, but it presupposes a degree of self-imposed frugality.

Perhaps this was too obvious to require a complete explanation for a Scotsman, like Smith, but a little over a century later the German sociologist, Max Weber, wrote a remarkable essay that connected the “spirit of capitalism” with the Protestant work ethic. One of Weber’s key arguments is that Calvinism changed the locus of one’s assurance of salvation from the Church to the individual. Calvinists could no longer derive their assurance from the mystery of transubstantiation during the Mass, which, as Weber puts it, resulted in:

“…a feeling of unprecedented inner loneliness of the single individual. In what was for the man of the age of the Reformation the most important thing in life, his eternal salvation, he was forced to follow his path alone to meet a destiny which had been decreed for him from eternity. No one could help him. No priest, for the chosen one can understand the word of God only in his own heart. No sacraments, for though the sacraments had been ordained by God for the increase of His glory, and must hence be scrupulously observed, they are not a means to the attainment of grace, but only the subjective externa subsidia of faith.”

Weber goes on to argue that the assurance of salvation had to be sought in one’s calling, in one’s employments in the world. According to Weber, the pastoral counsel said that “in order to attain that self-confidence [of salvation] intense worldly activity is recommended as the most suitable means. It and it alone disperses religious doubts and gives the certainty of grace.”

The peculiar quality of the Protestant work ethic then is that is justifies the pursuit of gain without making money itself the desired end. Wealth is a byproduct of one’s pursuit of assurance of salvation. It is not only ethical to pursue gain, it is spiritually desireable.

Weber does not mean to imply that belief in Protestant doctrine is necessary to the spirit of capitalism. In fact, he begins his essay with the “time is money” quotation from Benjamin Franklin. He says of Franklin:

"Benjamin Franklin himself, although he was a colorless deist, answers in his autobiography with a quotation from the Bible, which his strict Calvinistic father drummed into him again and again in his youth: "Seest thou a man diligent in his business? He shall stand before kings" (Prov. xxii. 29). The earning of money within the modern economic order is, so long as it is done legally, the result and the expression of virtue and proficiency in a calling; and this virtue and proficiency are, as it is now not difficult to see, the real Alpha and Omega of Franklin's ethic."

And of the spirit of modern capitalism, he says:

"One of the fundamental elements of the spirit of modern capitalism, and not only of that but of all modern culture: rational conduct on the basis of the idea of the calling, was born--that is what this discussion has sought to demonstrate-from the spirit of Christian asceticism. One has only to re-read the passage from Franklin, quoted at the beginning of this essay, in order to see that the essential elements of the attitude which was there called the spirit of capitalism are the same as what we have just shown to be the content of the Puritan worldly asceticism, only without the religious basis, which by Franklin's time had died away."

Thus, the Protestant Reformation gave western culture a warrant for pursuing wealth without the appearance of avarice. However, the frugality of this system was built into the spiritual intentions behind it. There is no hypocrisy involved in those who truly seek assurance of salvation in their work. Since their work forms the empirical basis of their assurance, they re-invest their capital back into it. Work is the end in itself, not the means to gaining capital. And this is crucial to understanding Smith’s “capitals are increased by parsimony, and diminished by prodigality and misconduct”.

Franklin may have been a “colorless Deist”, but he lived in a time when the Protestant work ethic still influenced the culture. Since it is controversial to suggest that there was a strong Christian influence in America in its early decades, let me offer this quote from De Tocqueville, writing around 1840:

"Unbelievers are to be met with in America, but there is no public organ of infidelity. Attempts have been made by some governments to protect morality by prohibiting licentious books. In the United States no one is punished for this sort of books, but no one is induced to write them; not because all the citizens are immaculate in conduct, but because the majority of the community is decent and orderly."

Our colorful atheists and agnostics today know no such restraint, but this is not nearly as ruinous to our culture as the impoverished Gospel offered by most churches today. In today’s church, assurance comes easy--or to borrow from Bonhoeffer, "cheap" . If you’re having doubts, you just need to make a greater effort to believe. Faith has become an existential exercise rather than the active involvement described in Hebrews 11. The idea of finding assurance in the worldly employments of your calling is regarded suspiciously as “works righteousness”—which confuses salvation with the assurance of salvation. It is probably no coincidence then that Christians are just as likely as non-Christians to go into debt and live above their means.

There is no way capitalism can survive in this environment. What we have today is not capitalism; we have its antithesis, a debt society. Our society is characterized now by prodigality and misconduct. We abuse the liberty of the marketplace and are decreasing capital. Under these conditions, it’s not at all surprising that “a more libertarian economy does have something to do with the breakdown of ‘sensible middle class values’”.

At the same time, restricting the liberty of markets as a solution to our social ills is a desperate capitulation to tyranny. The founders of capitalism were not entirely unaware of the real and potential problems of a free market, but they preferred these to tyranny. No economy can produce a moral society. Controlled economies do nothing more than transfer the source of woe from the character defects of the many to the character defects of a few. Socialized welfare economies destroy moral character by coercing charity.

Yes, I agree that a more libertarian economy has been the occasion for many social ills, but the cause of those ills is the character of society itself, not the economy.